What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2022-12-16 compared with 2021-12-17 · 20 added, 34 removed, 139 unchanged (28% of the section changed)

Quanex was incorporated in Delaware on December 12, 2007, as Quanex Building Products Corporation.

We manufacture components for original equipment manufacturers (OEM) in the building products industry.

These components can be categorized as window and door (fenestration) components and kitchen and bath cabinet components.

We currently manufacture components for original equipment manufacturers (OEM) in the building products industry.

The majority of these components can be categorized as window and door (fenestration) components and kitchen and bath cabinet components.

Examples of fenestration components include (1) energy-efficient flexible insulating glass spacers, (2) extruded vinyl profiles, (3) window and door screens, and (4) precision-formed metal and wood products.

In addition, we provide certain other non-fenestration components and products, which include solar panel sealants, trim moldings, vinyl decking, vinyl fencing, water retention barriers, and conservatory roof components.

We use low-cost production processes and engineering expertise to provide our customers with specialized products for their specific window, door, and cabinet applications.

We use low-cost production processes and engineering expertise to provide our customers with specialized products for their specific applications.

We believe these capabilities provide us with unique competitive advantages.

7 unchanged sentences

Since the spin-off in 2008, we have evolved our business by making investments in organic growth initiatives and taking a disciplined approach to new business and strategic acquisition opportunities, while disposing of non-core businesses.

As of October 31, 2021, we operated 28 manufacturing facilities located in 15 states in the U.S., two facilities in the U.K., and one in Germany.

These facilities feature efficient plant design and flexible manufacturing processes, enabling us to produce a wide variety of custom engineered products and components primarily focused on the window and door segment of the residential building products markets.

As of October 31, 2022, we oper ated 27 manufacturing facilities located in 15 states in the U.S., two facilities in the U.K., and one in Germany.

These facilities feature effi cient plant design and flexible manufacturing processes, enabling us to produce a wide variety of custom engineered products and components primarily focused on the window and door segment of the residential building products markets.

We are able to maintain minimal levels of finished goods inventories at most locations because we typically manufacture products upon order to customer specifications.

17 unchanged sentences

2024 1,035 17% 490 (5)% 126 5% 1,651

Ducker Worldwide LLC, a consulting and research firm, indicated in November 2021 that window shipments in the residential remodeling and replacement (R&R) mark et are expected to increase approximately 4.5% for the calendar-year 2021 and approximately 4% in 2022 and 3% during 2023.

Derived from re ports published by Ducker, the overall increase in window shipments for the trailing twelve months ended September 30, 2021 was 8.9%.

Ducker Worldwide LLC, a consulting and research firm, indicated in November 2022 that window shipments in the residential remodeling and replacement (R&R) market are expected to increase approximately 3% for the calendar-year 2022 and approximately 2% in 2023.

Derived from reports published by Ducker, the overall increase in window shipments for the trailing twelve months ended September 30, 2022 was 3%.

During this period, new construction activity increased 2% and R&R replacement increased 4% respectively.

According to data from Catalina Research, a consulting and research firm, U.S.

residential cabinet demand is expected to increase through 2022.

Proje ctions from Catalina Research as of November 2021 include growth rates for the stock, semi-custom (the cabinet market we primarily operate in) and custom cabinet markets, which are presented in the table below:

Cabinet Market Annual Growth Rates

Period Stock Semi-Custom Custom Overall

2017 8.5% 5.7% (0.9)% 6.6%

2018 7.9% (1.6)% 3.8% 4.9%

2019 1.8% (4.9)% 1.1% —%

2020 3.7% (1.3)% 0.3% 2.2%

Annual Data - Forecast

2021 15.2% 13.4% 17.5% 15.0%

2022 7.2% 5.2% 4.7% 6.5%

Projections from Catalina Research, a consulting and research firm, as of November 2022 include growth rates for semi-custom (the cabinet market we primarily operate in) and overall cabinet markets.

The semi-custom market increased 11% in calendar-year 2021, and is forecasted to increase 13% in 2022 followed by a forecasted decrease of 4% in 2023.

The overall cabinet market increased 16% in 2021 calendar-year, and is forecasted to increase 15% in 2022 followed by a forecasted decrease of 3% in 2023.

We have noted the following trends which we believe affect our industry:

8 unchanged sentences

and aluminum, wood and silicone products used by our other businesses;

• higher energy efficiency standards in Europe should favorably impact sales of our insulating glass spacer products in

the short- to mid-term.

• higher energy efficiency standards in Europe should favorably impact sales of our insulating glass spacer products in the short- to mid-term.

Our vision is to be the preferred supplier to our customers in each market we serve.

Our strategy to achieve this vision includes the following:

• focus on organic growth with our current customer base and expand our market share with national and regional customers by providing:

• focus on growth with a purpose and explore markets that are synergistic with existing manufacturing capabilities and expand our market share with national and regional customers and collaborative partnerships by providing:

(1) a quality product;

1 unchanged sentence

(3) product choices at different price points;

and (4) new products or enhancements to existing product offerings.

and (4) an expanded product portfolio or enhancements to existing product offerings.

These enhancements may include higher thermal efficiency, enhanced functionality, improved weatherability, better appearance and best-in-class quality for our fenestration and cabinet door products;

5 unchanged sentences

• offer logistics solutions that provide our customers with just-in-time service which can reduce their processing costs;

• recognizing the importance of sustainability and corporate social responsibility by continually looking for ways to reduce our environmental impact, protect the health and safety of our employees and communities, and engage diverse workers and leaders;

• recognize the importance of environmental, social, and corporate governance by continually looking for ways to reduce our environmental impact, including reducing our carbon footprint, protecting the health and safety of our employees and communities, and engaging diverse workers and leaders, and remain committed to doing good in our community;

• pursue targeted business acquisitions that allow us to expand our existing footprint, enhance our existing product offerings, acquire complementary technology, enhance our leadership position within the markets we serve, and expand into adjacent markets or service lines;

21 unchanged sentences

Competitors in the vinyl extrusion business in the U.K.

include Epwin, Veka, Profine UK Extrustions Ltd., Eurocell and others.

include Epwin, Veka, Profine UK Extrusions Ltd., Eurocell and others.

Primary competitors in the cabinet door business in the U.S.

7 unchanged sentences

Sales Backlog

Given the short lead times involved in our business, we have a backlog of approximatel y $83 million as of October 31, 2021.

The criteria for revenue recognition has not been met with regard to sales backlog, and therefore, we ha ve not recorded revenue or deferred revenue pursuant to these sales orders.

If these sales orders result in a sale, we will record revenue during fiscal 2022 in accordance with our revenue recognition accounting policy.

Given the short lead times involved in our business, we have a backlog of approximat ely $56 million as of October 31, 2022.

The criteria for revenue recognition has not been met with regard to sales backlog, and therefore, we have not recor ded revenue or deferred revenue pursuant to these sales orders.

If these sales orders result in a sale, we will record revenue in fiscal 2023 in accordance with our revenue recognition accounting policy.

Seasonal Nature of Business

13 unchanged sentences

We consider the following marks, design marks and associated trade names to be valuable in the conduct of our business:

HOMESHIELD, TRUSEAL TECHNOLOGIES, EDGETECH, MIKRON,

WOODCRAFT and QUANEX.

HOMESHIELD, TRUSEAL TECHNOLOGIES, EDGETECH, MIKRON, WOODCRAFT and QUANEX.

Through Liniar, we hold a number of registered designs, patents and trademarks registered in the U.K., which include:

23 unchanged sentences

Human Capital

We track human capital metrics that we consider to be key to our business, including employee headcount, temporary workers, health and safety, and turnover.

We track hum an capital metrics that we consider to be key to our business, including employee headcount, temporary workers, health and safety, and turnover.

As of October 31, 2022, we had 3,875 employees.

6 unchanged sentences

We offer our employees online training courses and on-the-job training on job duties, safety requirements, and leadership skills.

The health and safety of our employees is our high priority and in particular, in response to the COVID-19 pandemic.

We have taken additional measures to limit possible infections at the workplace.

See Part 2 Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations - Notable Items - COVID-19 Impacts,” elsewhere in this Annual Report on Form 10-K for related disclosure.

For Investors

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business